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en-usTechdirt. Stories filed under "losses"https://ii.techdirt.com/s/t/i/td-88x31.gifhttps://www.techdirt.com/Tue, 8 Sep 2015 14:01:00 PDTIP Enforcement Czar Wants To Hear From You About Government's IP Enforcement PlanMike Masnickhttps://www.techdirt.com/articles/20150905/00232332169/ip-enforcement-czar-wants-to-hear-you-about-governments-ip-enforcement-plan.shtml
https://www.techdirt.com/articles/20150905/00232332169/ip-enforcement-czar-wants-to-hear-you-about-governments-ip-enforcement-plan.shtmlasking for public input on the upcoming "Joint Strategic Plan on Intellectual Property Enforcement" that it will be releasing next year. The Joint Strategic Plan comes out every three years and is supposed to guide the federal government in how it handles priorities around intellectual property enforcement. Now, I recognize that the cynical among you will already be insisting that there is no value in responding to this, because the government is going to simply repeat the arguments of the legacy industries and its copyright extremists. However, in the past, these open comment periods have actually helped, and the two previous Joint Strategic Plans have not been as bad as expected. In 2010, we sent in our feedback and was pleasantly surprised that at least some of it was reflected in the plan. It recognized the importance of fair use and encouraging innovation. It also admitted that most studies on the impact of intellectual property on the economy were bogus.

Then, the second report, issued in 2013, was even better and presented a much more balanced understanding of intellectual property law, and how over-enforcement and over-expansion could create real harms as well. It also points out that truly the best way to deal with problems around "piracy" is through greater innovation, rather than relying on enforcement. It doubled down on supporting fair use, and noted that it was working with the Copyright Office to release an "index of major fair use decisions" -- something that finally came out just a few months ago and is actually pretty damn good.

In other words, this report need not just be a playground for Hollywood types looking to ratchet things up.

Still: there are concerns. The first two reports were done by the original IPEC, Victoria Espinel, who left the office a few years ago. This latest report will be overseen by the new IPEC, Danny Marti, who has only been in the job a few months. And, unfortunately, in one of his first speeches, he trotted out pretty much all of the ridiculous and debunked copyright extremist tropes about the need for greater protection, exaggerating the economic impact of intellectual property and demanding more "respect" for intellectual property (rather than earning more respect for it).

It's also somewhat concerning that in his blog post asking for public comments, he cites one of the most debunked statistics around, from the US Chamber of Commerce, concerning the "worldwide market for counterfeit and pirated products," which he argues is $1.8 trillion. Having spent years debunking earlier claims of $200 billion, the idea that it's magically shot up to $1.8 trillion is insane. What's incredible is that the "methodology" for the $1.8 trillion is laughable, and it's a shame that Marti would cite it. The Chamber of Commerce just took the already debunked numbers from 2008 (which, in case you are wondering were actually based on a number someone just made up in the 1980s and which has never been checked) and then "projected" out to 2015. Really. And Marti quotes it as if it has some validity.

And he does this despite the fact that actual credible sources like the Government Accountability Office and the OECD have both insisted that there is no evidence that the issue of counterfeiting is anywhere near as big as the earlier problems stated. Furthermore, multiple studies have further shown that counterfeiting is very rarely a true "economic loss" as it's almost never a substitution good, but rather an aspirational purchase. That is, the person buying the fake Rolex isn't taking any money away from Rolex, because they can't afford to buy a real one. In fact, multiple studies have found that those who buy counterfeit products regularly go on to buy the real product later, when they can afford to. In fact, it appears the purchase of a counterfeit often gives them a closer bond with the brand itself. And, in the end, estimates have suggested that actual counterfeiting is probably somewhere around 2 to 3% of the big numbers thrown around by the Chamber of Commerce.

So, you have to wonder, if Marti is tossing around numbers from one of the world's largest lobbying organizations, the US Chamber of Commerce, rather than from well respected and credible sources like the Government Accountability Office and the OECD, just where he's coming from as he puts together this report.

Hopefully, people can submit thoughtful and well-argued comments based on the details set forth in the Federal Register and help point Marti and the IPEC office in the right direction. Such comments are due by October 16th.

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]]>speak-uphttps://www.techdirt.com/comment_rss.php?sid=20150905/00232332169Fri, 2 Aug 2013 09:03:10 PDTPiracy Doesn't Create A Loss To 'The Economy,' But To A Particular IndustryMike Masnickhttps://www.techdirt.com/articles/20130727/02110623966/piracy-doesnt-create-loss-to-economy-to-particular-industry.shtml
https://www.techdirt.com/articles/20130727/02110623966/piracy-doesnt-create-loss-to-economy-to-particular-industry.shtmlmost researchers (finally) avoid this sort of claim, though a few will still try to sneak it in as something along the lines of "value of pirated goods," and then the press will run with that number without making the distinction. A second order of misleading is the claim that whatever "losses" are calculated are "losses to the economy." We see this all the time, with various maximalists insisting that without stronger protections that somehow this money goes away from the economy entirely.

Matt Schruers, over at Project DisCo has a good post discussing this exact point, noting that infringement leads to a redistribution of income. We can argue over whether or not that redistribution is good or bad (or societally beneficial or not), but to claim it's an overall loss to the economy is clearly wrong. He notes how rarely this even comes up in the discussion, which is unfortunate. However, he also points us to this hilarious Adult Swim ad, that I'd not seen before, which explains how piracy feeds babies (except, of course, TV piracy):

Matt makes it clear that this is, in no way, a defense of infringement, but rather just a reality. If we're going to be talking about copyright reform, the discussion should be honest, and that means not pretending that the money just disappears from the economy entirely. Like any redistributive economic system, it creates some winners and some losers, and a thorough economic analysis would study carefully who those winners and losers are, and whether having those winners and losers matches up with what the law is supposed to do. Similarly, recognizing that there are always some losers whenever you shift around a redistributive system, it can be worthwhile to look at whether or not it's necessary to do something to help out those who end up with the short end of the stick.

Matt's article is well worth reading -- and remembering, when the next group of "studies" claims massive losses to the economy. However, I'd argue in some ways, he actually understates the nefariousness of the "economic loss" claims that are often used. That's because one of the favorite "loss" stats that maximalists like to use -- such as the annual report that IPI puts out done by Stephen Siwek -- makes use of ridiculous "ripple effect" calculations. That is, they don't just say that "movie piracy costs the economy $6 billion per year," but they then add in a multiplier effect, claiming that this is to count the "ripple effects" of the money not spent on the movie. This is simply bad economics in a variety of ways. First, it's counting the same dollar over and over again:

In IPI-land, when a movie studio makes $10 selling a DVD to a Canadian, and then gives $7 to the company that manufactured the DVD and $2 to the guy who shipped it to Canada, society has benefitted by $10+$7+$2=$19. Yet some simple math shows that this is nonsense: the studio is $1 richer, the trucker is $2, and the manufacturer is $7. Shockingly enough, that adds up to $10. What each participant cares about is his profits, not his revenues.

So not only are they recounting the same dollar over and over and over and over and over again, pretending it's new each time, they're also only counting such ripples in one direction. That is, they assume that the money saved by not purchasing the content in question doesn't go back into the economy productively elsewhere. And, like the "piracy feeds babies" joke above, at times, the "ripple effect" in the other direction can be quite beneficial for the economy. For example, say a small company uses unauthorized copies of expensive software to build an amazing tool that drives all sorts of productivity growth elsewhere. That may be wrong and illegal, but the impact on the economy can actually be quite positive.

Again, the point of all of this is not to say that infringement has no economic impact at all -- or that it's good or bad. There are a lot of different variables at play here. And that's the key point. Any serious look at the economic impact of changing the laws needs to take a look at all of that in determining the overall economic impact, and not just at the aggregate economic impact, but the economic impact throughout the chain. Unfortunately, so far, very few studies appear to go that far, and, instead present very misleading statements about the overall impact on the economy.

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]]>good-pointhttps://www.techdirt.com/comment_rss.php?sid=20130727/02110623966Wed, 27 Feb 2013 07:51:38 PSTBogus Copyright Numbers Enter The Fight Over Cyberhacking As WellMike Masnickhttps://www.techdirt.com/articles/20130224/22442122092/bogus-copyright-numbers-enter-fight-over-cyberhacking-as-well.shtml
https://www.techdirt.com/articles/20130224/22442122092/bogus-copyright-numbers-enter-fight-over-cyberhacking-as-well.shtmlbogus the numbers are that get thrown around for "losses" and "job losses" due to copyright infringement. And yet they keep getting repeated. Two years ago, we were particularly stunned by a report from the ITC that claimed $48 billion dollars in losses directly due to Chinese piracy. But, as we looked at the methodology, the whole thing was completely ridiculous. It was based on just asking a bunch of companies how much they thought they must have lost to Chinese infringement. Not only is that a horribly unreliable and biased way to try to determine what's actually going on, it's difficult to see how companies would even know that information in the first place.

Outside of piracy, we've also noted that the stats used to support "cybercrime" and "cybersecurity" efforts are often just as bogus. And here we have a story that brings the two subjects together.

SongLifter points us to a NY Post article about Chinese cyberhacking which builds off of the Mandiant report that got so much attention. The article is bizarre in that it claims that the US isn't fighting back against Chinese hackers and somehow that we're sitting on our hands while a great "cyberwar" is being waged against us. Apparently, the author, Ralph Peters, is wholly unaware that some of the only confirmed "attacks" via a computer system were by the US. All this "woe is us" hand-wringing is just bizarre. But then Rogers tosses out these bogus and debunked numbers as if they're proof that we must attack China online:

According to the US International Trade Commission, Chinese intellectual property theft cost the United States $48 billion in 2009, as well as taking away 2 million jobs. Since then, the amount of theft has worsened, so the total loss is likely around $300 billion. But US companies, afraid that making their losses public will shake consumer confidence, won’t go public with their outrage.

Except, there's no way those numbers are even close to accurate. Again, they're based on self-reporting, and any estimate of "value" is guaranteed to be grossly overweighted. Then, take those numbers and, for reasons that make no sense at all, you don't just "grow" the $48 billion, but expand it more than six times to claim it must be up to $300 billion by now? Really? And we're using that totally bogus and made up number as the basis of an argument for why we need to kick off a "cyberattack" on China? As if that won't escalate things even further? Incredible.

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]]>is-there-nothing-those-numbers-can't-do?https://www.techdirt.com/comment_rss.php?sid=20130224/22442122092Thu, 2 Aug 2012 12:53:25 PDTThe Stats Used To Support Cybercrime 'Threats' Just As Bogus As Hollywood's 'Loss' ClaimsMike Masnickhttps://www.techdirt.com/articles/20120802/02474519915/stats-used-to-support-cybercrime-threats-just-as-bogus-as-hollywoods-loss-claims.shtml
https://www.techdirt.com/articles/20120802/02474519915/stats-used-to-support-cybercrime-threats-just-as-bogus-as-hollywoods-loss-claims.shtmlon ice for now, it'll be back... and with it there will be a lot more hyperbole about how urgent this is because of various massive "losses" already happening due to cybersecurity problems. Of course, nearly all of the numbers and claims you hear will be 100% bogus.

For years, we've highlighted stories about how the claims of "losses" from the entertainment industry due to infringement are completely fictitious. In the past, we've seen Julian Sanchez go on a hunt to find the origin of some of the numbers being thrown around, and come up with evidence that they're based on nothing. For example, claims of $200 billion in losses due to counterfeiting... came from a 1993 Forbes article that just makes that claim with no citation and no backing info. But it became gospel among those arguing there was as problem.

With Congress and the President continuing to insist that we need a cybersecurity bill, politicians have been tossing around all sorts of questionable numbers. Just a few weeks ago, we noted that General Keith Alexander, the head of the NSA, had tossed out some numbers and claimed that cybersecurity was the "greatest transfer of wealth in history." Considering that we're living through the aftermath of a financial meltdown that involved a massive transfer of wealth, I find the original claim difficult to believe. Plus, as we noted, he seemed to only cite studies from McAfee and Symantec, two companies who have a massive vested interest in keeping the cybersecurity FUD going, because it helps them sell stuff.

Thankfully, the folks over at Pro Publica decided to take a much closer look at the numbers politicians are relying on in support of the massive "harm" that is already being caused by online security issues... and discovered that the numbers are completely and totally bogus. In fact, the full story (which is fascinating) parallels (very closely) the story with "piracy" stats from the industry.

One popular number is "$1 trillion" in losses due to cybersecurity breaches. That number gets thrown around a lot by politicians (and many in the press who merely parrot such numbers unquestioningly, even as that gives those politicians more cover to claim that there's a reputable source supporting the number). Yet, the Pro Publica report highlights that, not only is this number bogus, but the (quite well respected) researchers who put together the original report for McAfee did not use that number and, more importantly, many of them spoke out publicly with surprise that McAfee put out a press release with such a number -- which they thought was questionable and not supported by their data.

In fact, there were a number of methodological problems, including that the data was based on a self-reported "average" amount of the "worth of sensitive information stored in offshore computer systems." Who knows if the respondents are being accurate, first of all, but even more to the point, the "worth" of such information is a highly subjective number. People can find something "worthwhile" without paying for it, but by focusing on the "worth," they obscure the fact that the market price may be quite different than what people think something is worth. And, what people think something is worth has zero impact on any actual losses. But, from a very small number, McAfee just sprinkled some magic pixie dust on the already questionable number, and proceeded to extrapolate, massively:

“The companies surveyed estimated they lost a combined $4.6 billion worth of intellectual property last year alone, and spent approximately $600 million repairing damage from data breaches,” the release said. “Based on these numbers, McAfee projects that companies worldwide lost more than $1 trillion last year.” The release contained a quote from McAfee’s then-president and chief executive David DeWalt, in which he repeated the $1 trillion estimate. The headline of the news release was “Businesses Lose More than $1 Trillion in Intellectual Property Due to Data Theft and Cybercrime.”

The trillion-dollar estimate was picked up by the media, including Bloomberg and CNET, which expressed no skepticism.

Now, remember, this $1 trillion number is just in the press release. It's not in the report at all. And the report's researchers were just as baffled (and even more concerned) about this:

Among [the study's researchers] was Ross Anderson, a security engineering professor at University of Cambridge, who told ProPublica that he did not know about the $1 trillion estimate before it was announced. “I would have objected at the time had I known about it,” he said. “The intellectual quality of this ($1 trillion number) is below abysmal.”

.... The company’s method did not meet the standards of the Purdue researchers whom it had engaged to analyze the survey responses and help write the report. In phone interviews and emails to ProPublica, associate professor Jackie Rees Ulmer said she was disconcerted when, a few days before the report’s unveiling, she received a draft of the news release that contained the $1 trillion figure. “I expressed my concern with the number as we did not generate it,” Rees Ulmer said in an email. She added that although she couldn’t recall the particulars of the phone conversation in which she made her concerns known, “It is almost certainly the case that I would have told them the number was unsupportable.”

...The news stories got the worried attention of some of the report’s contributors because McAfee was connecting their names to an estimate they had no previous knowledge of and were skeptical about. One of the contributors, Augusto Paes de Barros, a Brazilian security consultant, blogged a week after the news release that although he was glad to have been involved in the report, “I could not find any data in that report that could lead into that number.... I’d like to see how they found this number.”

I don't know about you, but when a super well respected security researcher tells you that the basis of a particular claim is based on a number whose "intellectual quality ... is below abysmal," that's the point at which you should probably stop using the number. But, instead, politicians and the press continue to parrot the line over and over again.

The slightly smaller number, from Symantec, is still equally questionable. They go with $250 billion... but the number has almost no support. It does come from a real Symantec report, but not from Symatec employees. Instead, they hired another firm to magically come up with the number, and it sounds like magic would have been equally as effective as what was eventually done. It raised concerns from actual experts in the field:

“Far from being broadly-based estimates of losses across the population, the cyber-crime estimates that we have appear to be largely the answers of a handful of people extrapolated to the whole population.”

Furthermore, even if we take these numbers at face value, the original reports on both of them say these numbers represent the value of the attacks in question, and not what was actually "lost" or how much it cost to deal with. However, when a politician quotes them, they almost always do so by at least suggesting that these made up "values" are very real "losses" to companies. In other words, the numbers (shocker, shocker) are being twisted by cybersecurity law supporters. For example, just recently, Senator Collins said that General Alexander "believes American companies have lost about $250 billion a year," but that's not true. Already, we know the number is suspect -- but even if we accepted the number, it only represents the "value" that various companies have put on things harmed by security issues, not any sense of actual losses. Claiming that these are losses isn't just misleading, it's wrong.

We've argued for years that actual data should inform the debate on these things -- but that data needs to be accurate and supportable. Unfortunately, with cybersecurity threats, the claims that are being thrown around have no basis in reality. If politicians really want to discuss the "threat" of cybersecurity, the least they can do is get some accurate research on the scope of the problem. Trusting a number from a McAfee press release is not credible and it's certainly no basis for passing a law that wipes out privacy rights of the public.

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]]>but-of-course...https://www.techdirt.com/comment_rss.php?sid=20120802/02474519915Wed, 1 Aug 2012 16:19:52 PDTThe Economist Shreds BSA Cloud Credentials Piracy NumbersTimothy Geignerhttps://www.techdirt.com/articles/20120730/07002919878/economist-shreds-bsa-cloud-credentials-piracy-numbers.shtml
https://www.techdirt.com/articles/20120730/07002919878/economist-shreds-bsa-cloud-credentials-piracy-numbers.shtmlpull more numbers out of their collective behinds than The Count from Sesame Street. It's a strange tactic, if only because once they are caught cow-pooping their own figures it seems to indicate that the problem is not nearly what they're claiming and therefore their response and policy recommendations no longer worth considering. Unfortunately, many members of the esteemed 4th Branch are inclined to simply parrot these fudged stats and report them as news.

Let's start with the BSA claims, shall we? Did you realize that 30% of people in wealthy nations and 45% of people in less-wealthy nations "have a liklihood of sharing log-in credentials for paid [cloud] services?" That's the conclusion drawn by the BSA's latest study. And if that seems like a lofty number to you, it may be because it's utter bullshit.

The Economist begins by correcting the BSA's pretend numbers:

"The percentages come from a question in which people were asked if they had ever shared their log-in details for paid services. Some 15% of people in rich countries and 34% in poor countries said they had for personal use. For business use, it was 30% and 45% respectively...Moreover the respondents were only those who had paid for cloud services, which was a fraction of users. Cloud services are generally based on a “freemium” model, whereby basic use costs nothing and a premium version is paid for. According to the BSA's own data, only half of computer users tap cloud services, of which only one-third use it for business, of which two-thirds pay. Of the small subset that remain, the minority share log-ins. This changes things considerably. If the BSA figures were adjusted for all this, the potential piracy figures could be as low as between 2% and 6% of users—as much as 20 times less than the group claims. (The BSA's data is online here.)"

In other words, through the magic of pretending like only a small subset of data is the entire data, the BSA has magically turned the number two into the number thirty. This would be laudable if those numbers were fish, the readers were hungry, and the BSA was trying to claim it had perfected what I lovingly refer to as "Jesus' Fish Fry Miracle", but they aren't, dear readers. No, they're going to policy makers with this nonsense.

And that isn't even the end of the story. The piece also points out that the BSA's survey failed to ask what might just be an important question: does sharing log-in credentials with a friend violate that service's TOS? If it doesn't, that isn't piracy. But the BSA doesn't bother to ask that question because they don't care, they're just looking for numbers that support their conclusions, here.

The article then points out a couple of other ommissions on the BSA's part:

"There are other anomalies. The BSA only considered PC use, when many people use cloud services over tablets and mobile phones, especially in poor places. And the survey, of 14,702 people in 33 countries, presumes to speak with confidence about the “developing” world but not a single African country is represented—an odd omission, since it is a fast growing market."

In short, these BSA claims are a "study" in the same way that snake-handling is a "religion": it isn't.

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]]>more-bs-from-the-bsahttps://www.techdirt.com/comment_rss.php?sid=20120730/07002919878Wed, 18 Apr 2012 10:25:00 PDTGuess What? Most Cybercrime 'Losses' Are Massively Exaggerated As WellMike Masnickhttps://www.techdirt.com/articles/20120417/03595418520/guess-what-most-cybercrime-losses-are-massively-exaggerated-as-well.shtml
https://www.techdirt.com/articles/20120417/03595418520/guess-what-most-cybercrime-losses-are-massively-exaggerated-as-well.shtmlmassively inflated. It appears that others are figuring this out as well. The NY Times has an op-ed piece from two researchers, Dinei Florencio and Cormac Herley, highlighting how all the claims of massive damages from "cybercrime" appear to be exaggerated -- often by quite a bit:

One recent estimate placed annual direct consumer losses at $114 billion worldwide. It turns out, however, that such widely circulated cybercrime estimates are generated using absurdly bad statistical methods, making them wholly unreliable.

Most cybercrime estimates are based on surveys of consumers and companies. They borrow credibility from election polls, which we have learned to trust. However, when extrapolating from a surveyed group to the overall population, there is an enormous difference between preference questions (which are used in election polls) and numerical questions (as in cybercrime surveys).

For one thing, in numeric surveys, errors are almost always upward: since the amounts of estimated losses must be positive, there’s no limit on the upside, but zero is a hard limit on the downside. As a consequence, respondent errors — or outright lies — cannot be canceled out. Even worse, errors get amplified when researchers scale between the survey group and the overall population.

This is pretty common. In the first link above, we wrote about how a single $7,500 "loss" was extrapolated into $1.5 billion in losses. The simple fact is that, while such things can make some people lose some money, the size of the problem has been massively exaggerated. As these researchers note, this kind of thing happens all the time. They point to an FTC report, where two respondents alone provided answers that effectively would have added $37 billion in total "losses" to the estimate.

This doesn't mean that the problems should be ignored, just that we should have some facts and real evidence, rather than ridiculous estimates. If the problem isn't that big, the response should be proportional to that. Unfortunately, that rarely happens. In fact, combining this with the recent ridiculous stories about the need for "cybersecurity," perhaps we can start to estimate just how much of an exaggeration in FUD the prefix "cyber-" adds to things. I'm guessing it's at least an order of magnitude. Combine bad statistical methodology with the scary new interweb thing, and you've got the makings of an all-out moral panic.

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]]>because they're not losseshttps://www.techdirt.com/comment_rss.php?sid=20120417/03595418520Mon, 12 Sep 2011 09:50:16 PDTMPAA: Bad At Math & Bad At EconomicsMike Masnickhttps://www.techdirt.com/articles/20110909/02541415865/mpaa-bad-math-bad-economics.shtml
https://www.techdirt.com/articles/20110909/02541415865/mpaa-bad-math-bad-economics.shtmlbuying 200 more DVDs per year. The MPAA folks were apparently not happy that people called them on their misleading stats, and have come out with a statement, which it claims is about "correcting the record."

If only that were true. Instead, we get more misleading bunk from the Masters of Propaganda.

First off, the MPAA admits that perhaps (just perhaps) their original graphic may have been a little misleading, and have put out a new version that moves away from implying that they were losing $58 billion, and now merely suggests that it's the US economy that loses this much money from the combined infringement on movies, music, packaged software and video games. This is complete and utter bunk -- and the MPAA folks either know this and are lying... or they're idiots. Take your pick.

The $58 billion claim comes from a study from The Institute for Policy Innovation that has been debunked so many times over, the fact that the MPAA would even bring it up is a laugh. And it's based on a very questionable analysis of the broadly defined "copyright industry." Of course, as we've noted in the past, the definition of "the copyright industry" for such studies includes all sorts of goods and services that do not rely on copyright at all, but are force-lumped into this study. So, if we're talking about actual products that rely on copyright, you probably have to ratchet down the scale by an order of magnitude. And that's just to start. From there, you have to realize that IPI's numbers use completely bogus math.

Tim Lee did an excellent job explaining the economic and mathematical fallacies of their methodology years ago (for which IPI kindly tried to get him fired from his job). The key issue is how the IPI counts "losses."

In IPI-land, when a movie studio makes $10 selling a DVD to a Canadian, and then gives $7 to the company that manufactured the DVD and $2 to the guy who shipped it to Canada, society has benefitted by $10+$7+$2=$19. Yet some simple math shows that this is nonsense: the studio is $1 richer, the trucker is $2, and the manufacturer is $7. Shockingly enough, that adds up to $10. What each participant cares about is his profits, not his revenues.

Furthermore, in IPI and MPAA fantasy-land, dollars not spent on movies simply disappear from the economy. And yet, anyone can tell you that's simply not true. That money continues to be spent elsewhere, and plenty of studies have shown that, despite growing infringement online, the amount of money that individuals spend on entertainment continues to rise.

So why would the MPAA rely on this number, which is so obviously false? Because it doesn't care about the truth or accuracy or "correcting the record." The MPAA's job is to get Congress to pass laws that divert money from what the market wants to its legacy studios who are slow to adapt. So it will use any number it can get its hands on, no matter how ridiculous. It's just that this time it got called on it, so it had to scramble to try to make the number look even a little bit legit...

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]]>sighhttps://www.techdirt.com/comment_rss.php?sid=20110909/02541415865Thu, 19 May 2011 10:15:07 PDTUS ITC Uses Ridiculous Methodology To Claim 'Piracy' In China Costs US Firms $48 Billion In 2009Mike Masnickhttps://www.techdirt.com/articles/20110518/16301314325/us-itc-uses-ridiculous-methodology-to-claim-piracy-china-costs-us-firms-48-billion-2009.shtml
https://www.techdirt.com/articles/20110518/16301314325/us-itc-uses-ridiculous-methodology-to-claim-piracy-china-costs-us-firms-48-billion-2009.shtmlthe "cost" of intellectual property infringement in China. I was surprised that Reuters, of all publications, would have such a vague description of the report, and not discuss the methodology at all. After all, Reuters employs Felix Salmon, who is one a very small number of folks who has spent quite some time debunking the methodology of similar studies.

In this case, the ITC is claiming losses of a rather astounding $48 billion. Having seen similar studies over the years, both good and bad, my first reaction was that this didn't pass the laugh test (at all) and sounded like the typical exaggerations from industry. So, I looked at the actual ITC report (pdf and embedded below) and it turns out it's even worse than I expected. Rather than taking any sort of actual objective study, the ITC simply asked 5,000 companies for what they thought their "losses" to Chinese infringement were. Not only that, but the ITC tried to choose the firms who were most likely impacted by this -- which means those who have the highest incentives to lie or exaggerate, because they want to have greater protectionism against Chinese competition.

Seriously, this methodology is just dopey. It's like asking horse and buggy makers how much in "losses" they would suffer if the automobile market were allowed to move forward -- and then basing regulatory policy on what they had to say. What's most frustrating about this is that folks at the ITC know this. Just last year, it held hearings on this topic for this very report in which it was told, repeatedly, by experts that such methodologies were woefully inaccurate. Given that, it's somewhat incomprehensible that the ITC would still use such an obviously wrong and biased methodology to support its claims.

It's both disappointing and troubling that the ITC would use such a methodology (and that the press would parrot the numbers back as fact, without bothering to look at or even mention the methodology). The real problem is that this clearly bogus study will now likely have a tremendous impact on US policy towards China.

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]]>mythical-losseshttps://www.techdirt.com/comment_rss.php?sid=20110518/16301314325Thu, 24 Mar 2011 03:58:30 PDTSome In The Press Realizing That Copyright Industry Claims Of 'Losses' From 'Piracy' Are BunkMike Masnickhttps://www.techdirt.com/articles/20110322/02484913581/some-press-realizing-that-copyright-industry-claims-losses-piracy-are-bunk.shtml
https://www.techdirt.com/articles/20110322/02484913581/some-press-realizing-that-copyright-industry-claims-losses-piracy-are-bunk.shtmllaughable new reports that were released by copyright industry interests in the past couple months, pushing claims of ridiculously high "losses" due to copyright infringement. The reports have been debunked, but part of the concern was that mainstream press, such as The Australian, were spreading these reports as fact. Thankfully, not everyone in the press falls for such questionable studies. The Sydney Morning Herald recently published a rather comprehensive look at all of these reports and studies, entitled: Piracy: are we being conned? It does a really nice job pushing back on all this industry-backed research, to point out that the story is more complex and nuanced that those fear-mongering claims make it out to be:

The Australian Institute of Criminology for one has been reluctant to take the industry at its word when it comes to piracy losses.

"Although these estimates provide a general indication of the scale of the problem, the validity of the data is open to some debate," the AIC wrote in its latest report on intellectual property crime in Australia.

The AIC has previously debunked claims that piracy was linked to organised crime and in a draft report leaked in 2006 said industry-provided piracy statistics were "self-serving hyperbole".

"The AIC's frustration was largely based on the fact that none of these groups will expose their reports to genuine peer review or analysis," said Kimberlee Weatherall, a senior law lecturer at the University of Queensland, who specialises in copyright law and is highly critical of the industry's piracy reports.

"When the US Government Accountability Office (GAO) looked into it at the request of US Congress, it expressed doubt about most of the industry-produced figures."

Piracy figures derived by the entertainment industry have also been heavily criticised in the US and Europe. In some instances, the industry has admitted to grossly inflating its numbers.

The article includes a lot more debunking of industry FUD. Nice to see that the press is finally realizing that claims that come from an industry looking for government protectionist laws to be adjusted in their favor can't necessarily be trusted.

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]]>moving-onhttps://www.techdirt.com/comment_rss.php?sid=20110322/02484913581Wed, 14 Jul 2010 19:44:33 PDTIs The Entertainment Industry Doing Itself Any Favors With Ridiculous Loss Claims?Mike Masnickhttps://www.techdirt.com/articles/20100714/10193910213.shtml
https://www.techdirt.com/articles/20100714/10193910213.shtmlcredible source, it's not hard to realize they're totally bogus. This also comes up in various lawsuits. For example, a Russian torrent tracker was shut down, and the operators of the site are now being accused of causing $1.25 billion (with a b) in losses for the movie industry. This is substantiated by... well... absolutely nothing other than movie studios insisting that it's true. I'm curious as to why they do this, because when they put forth such unbelievable numbers, it seems like they're only hurting themselves. No one believes that such numbers are even close to true and it just makes it that much more difficult to take them seriously. Then again, maybe they're just using some Hollywood accounting to figure out those losses...

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]]>doubtfulhttps://www.techdirt.com/comment_rss.php?sid=20100714/10193910213Thu, 24 Jun 2010 10:54:27 PDTNew Zealand Media Claiming That Huge Local Film Success Story Is Being Harmed... By 200 Downloaders?Mike Masnickhttps://www.techdirt.com/articles/20100623/0212019932.shtml
https://www.techdirt.com/articles/20100623/0212019932.shtmlBoy, has been a huge success -- having the third most successful box office of a New Zealand film ever. Not bad, right? But, months after the film has been out in the theaters, it's now been leaked to the internet, and suddenly the media frenzy is about just how much this is "costing" the filmmakers. No evidence (at all), is presented. They just claim that a leak like this will cost a million dollars. Even more amusing, at the time these reports came out, they said that the movie had only been downloaded 200 times. But, if you look at the comments on that article, a ton of them are thanking the publications for letting everyone know the movie was available for download. Of course, many of the commenters are also pointing out that they don't live in New Zealand, and there was no way for them to see the movie otherwise... meaning that those downloads aren't losses at all. But, it seems the reporters never bothered to mention that rather important fact.

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]]>say-what-now?https://www.techdirt.com/comment_rss.php?sid=20100623/0212019932Mon, 24 May 2010 09:00:57 PDTZappos Admits Pricing Mistake Cost It $1.6 Million; But Is Upfront About Taking The Hit ItselfMike Masnickhttps://www.techdirt.com/articles/20100524/0005579540.shtml
https://www.techdirt.com/articles/20100524/0005579540.shtmlusually contacts everyone who ordered to let them know the order won't be fulfilled because it was a mistake. I actually have no problem with this, though some people think it's horribly evil. Either way, what seems to almost always happen is that the negative publicity that follows leads the company to change its mind and honor the original price. Sometimes, it actually takes a lawsuit to make that happen.

However, this weekend, it looks like Zappos had a pretty massive pricing glitch on its sister site 6pm.com. It lasted a few hours. But what's different this time is that once Zappos fixed things, it immediately decided that it would still honor the wrong prices, even though the mistakes would end up costing the company (now owned by Amazon) $1.6 million. Now, between Amazon and Zappos, the two companies have a ton of money, and continue making a lot of money every day. But, no matter what, a $1.6 million pricing error is still a big deal. Big enough that you would think that the company could potentially withstand any sort of PR hit to trying to not honor those prices (perhaps offering up some sort of gift certificate or benefit to those impacted, instead). However, for a company that bases its entire reputation on bending over backwards to make customers happy, it appears they quickly decided that it was best for their overall reputation to just eat the $1.6 million, and keep (or even boost) that customer service reputation.

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]]>such is lifehttps://www.techdirt.com/comment_rss.php?sid=20100524/0005579540Wed, 13 Jan 2010 15:56:37 PSTHow Many Questionable Assumptions Can You Layer On Top Of Each Other To Estimate Bogus 'Losses' From Unauthorized iPhone App Downloads?Mike Masnickhttps://www.techdirt.com/articles/20100113/1434217734.shtml
https://www.techdirt.com/articles/20100113/1434217734.shtmlevery single one of them was wrong -- and some of them could have been checked with a simple look at our website. Given that every single assumption was wrong, the conclusion was equally laughable. I actually emailed them to point out a few factual errors in the post -- none of which were corrected. Since then I tend not to trust anything from that site -- though it has a habit of getting attention for similarly ridiculous "estimates," and people repeat them as if they were factual.

Allison K was the first of a whole bunch of you to send in the fact that the site is trying to "estimate" the "impact of piracy" of iPhone apps on Apple and app developers. While I commend the site on at least explaining its methodology, the more you read it, the more ridiculous it becomes. They simply layer questionable assumption upon questionable assumption upon questionable assumption, and when they get stuck, they pull out a random number. It's almost comical to read. As Allison noted, it reminds her of xkcd's famous comic of the Drake Equation, where one of the variables in the formula is defined as "Amount of bullshit you're willing to buy from Frank Drake":

It's nice to have some sort of concrete numbers, because people like to have numbers to discuss. But when they're based on so many layers of questionable assumptions, they tend to do a lot more harm than good. People will assume there's some real basis for them when there is not.

And, of course, as everyone should understand by now there's no such thing as "losses" from unauthorized access. There is only a failure on the part of the company to convince people to buy. There is no line in their financial reports on "losses" from such activities -- with good reason. The only issue is a business model issue, which is that the company has not given users a good enough reason to buy, so they chose to get the product elsewhere.

Update: And it gets more ridiculous. 24/7's response was a comment below that did not address any of the concerns but simply says that I must not have made it through my high school math class. Classy. Meanwhile, Dark Helmet points us to TUAW's takedown of the numbers, where they note that based on the assumptions, 24/7 appears to be assuming that there are 510 pirated apps per device. Uh. Yeah. Check those assumptions, folks.

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]]>let me count the wayshttps://www.techdirt.com/comment_rss.php?sid=20100113/1434217734Tue, 8 Dec 2009 08:49:00 PSTThis Is What's Wrong With eBooks: Amazon Loses $2 On Every eBook SoldMike Masnickhttps://www.techdirt.com/articles/20091206/2048537223.shtml
https://www.techdirt.com/articles/20091206/2048537223.shtmltoo expensive and about book publishers complaining that ebooks are too cheap. Guess who's getting squeezed in the middle? According to this unsourced report (so, perhaps take it with a grain of salt), Amazon is losing $2 per ebook sale, because publishers are wholesaling the books at $12, while Amazon wants to keep selling its ebooks at $10. The conclusion is the same all the way around, however: the publishers are living in a fantasy world if they think that $12 makes sense as a wholesale price for an ebook. Without the cost of printing, binding and distribution, the wholesale price should be a hell of a lot lower.

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]]>but-we'll-make-it-up-in-volumehttps://www.techdirt.com/comment_rss.php?sid=20091206/2048537223Thu, 24 Sep 2009 10:01:00 PDTStock Photo Site Owner Claims Infringement Costs The Industry 5X The Entire Industry's SizeMike Masnickhttps://www.techdirt.com/articles/20090921/0328456266.shtml
https://www.techdirt.com/articles/20090921/0328456266.shtmlRose M. Welch points out that the CEO of a stock photo site is claiming that infringement costs the industry $10 billion per year. Now, that's quite impressive, considering the entire current stock photo industry is only $2 billion. And, while the reporter expresses some skepticism towards the number, the overall article is still deferential to the idea that $10 billion might not be that far off, and thus, obviously, there's a huge problem. Wouldn't it be nice if reporters actually explored where such numbers come from and why they're totally ridiculous? Does anyone actually think that most of the people who use such photos without authorization would pay for them otherwise? Does anyone actually think the vast majority of those uses are "losses?" Then why report them as such? Why not focus on the real issue: that the market has changed and photographers (and stock photo sites) need to learn to adapt.

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]]>uh,-yeahhttps://www.techdirt.com/comment_rss.php?sid=20090921/0328456266Thu, 28 May 2009 09:50:00 PDTDutch Music Collection Society Loses Artist Royalties In The Stock MarketMike Masnickhttps://www.techdirt.com/articles/20090527/1750055037.shtml
https://www.techdirt.com/articles/20090527/1750055037.shtmlhanging on to it themselves. Billboard reports that the Dutch collection society, Buma/Stemra, is happily telling people that revenue rose by 2% last year -- though, oddly, the Billboard report leaves out one rather interesting detail. Reader Marcel de Jong notes that Buma/Stemra invested a bunch of the money it collected for artists into the stock market and then lost a chunk of it, so it's paying artists less money than it collected for them. What's unclear is if Buma/Stemra would have paid out more if it had made money... and also why it's gambling on the stock market with money it supposedly collected for artists.

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]]>good-job,-guyshttps://www.techdirt.com/comment_rss.php?sid=20090527/1750055037Fri, 11 Jul 2008 06:42:00 PDTDRM Company Releases One-Sided Study On DVD CopyingMike Masnickhttps://www.techdirt.com/articles/20080710/1502511640.shtml
https://www.techdirt.com/articles/20080710/1502511640.shtmlstudies exaggerate the negative impact of unauthorized copying, while totally ignoring any positive impact. For example, it likes to widely cite a study (which it paid for) that triple- and quadruple-counts "losses" by noting the ripple effects. At the same time, it totally ignores the same positive ripple effects (the ones that cancel out the negative ones, and may even outweigh them). Of course, a big part of this is the claim that an unauthorized copy is a "lost sale."

Now it appears that Macrovision, the big DRM company that supplies DRM to movie studios has cooked up its own study trying to support the MPAA in this argument, claiming that lots of people are copying DVDs and that most of them would buy the DVDs they copy otherwise. However, the LA Times' Jon Healey does an excellent job pointing out the many significant weaknesses in the study, starting, of course, with the fact that it was paid for by Macrovision, with a clear intent in the results. And while Macrovision hypes of the fact that many people in the survey said they would have bought the DVDs they copied, it ignores the fact that the majority of folks they spoke to said the DVDs they made copies of were ones they already legitimately owned.

Even then, the results really aren't as significant as Macrovision would like you (or, rather, Hollywood) to believe. As Healey notes, the study completely ignores the positive impacts of being able to make a copy of a DVD. In fact, the most common reason for making a copy was for perfectly legal time-shifting or back-up purposes from DVDs they legitimately own. In other words, being able able to make those copies is a valuable part of the DVD. Take that away and people will buy fewer DVDs because you've made them less valuable. But, of course, that doesn't show up anywhere in the results, because that's the last thing Macrovision wants people thinking about.

While the study also hypes up the fact that more TV shows are being copied via DVD, it ignores the fact that this is probably quite beneficial. Since TV shows are ongoing experiences, you want more viewers -- and if a copy of a DVD gets someone new hooked on the show, they're more likely to start watching it on TV or to buy a future DVD. But, again, that's not mentioned at all. Either way, props to Healey and the LA Times for digging into the numbers a bit and not just parroting the press release findings, like many other news sources.

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]]>let's-pick-this-aparthttps://www.techdirt.com/comment_rss.php?sid=20080710/1502511640Wed, 14 May 2008 14:43:21 PDTBSA Releases Latest Stats; Stands By Same Old StoryMike Masnickhttps://www.techdirt.com/articles/20080514/1350531114.shtml
https://www.techdirt.com/articles/20080514/1350531114.shtml2004 I call them out on how misleading many of the stats are (or, more specifically, I jokingly refer to the BSA as Bogus Stats as Always). At times, even IDC, who puts the report together for the BSA, has admitted that the BSA has tended to misrepresent the results -- and yet IDC keeps putting together the report every year. The good news, honestly, is that over the past few years, we've seen a changing trend in the coverage of the reports on these numbers, in that more people are calling the BSA out for using the numbers in a misleading way. The BSA, to its credit, has at least tried to be more conscious of how it presents and explains its numbers... sometimes.

Perhaps because of this, in advance of the release of the latest report today, the BSA reached out to me (and I'm sure plenty of others as well) to talk about the report and address any concerns. I spent half an hour on the phone this afternoon with Neil MacBride, the BSA's VP of Anti-Piracy and General Counsel. With him was Marcel Warmerdam an associate VP from IDC. I really appreciate the two spending the time to discuss the latest study with me -- as (this should come as no surprise) we didn't agree on very much.

The report itself seems pretty similar to what's come out in previous years. IDC does a rather credible job in determining the rate of unauthorized use throughout the world. The report this year highlights the fact that the rate of unauthorized use appears to be falling in many countries while rising in a few rapidly developing ones (Brazil, Russia, India and China). This is no surprise, as it's pretty much what anyone watching this market knows happens. I have no problem with the reporting on the rate of unauthorized usage.

Where things get problematic, however, is when the report starts to look at the impact of such things. The report itself shifts back and forth between "retail value of the software" and "losses" as if they are one and the same. By now, it should be quite clear that they are not the same. My second problem is that the report also ties these faux "losses" to a separate IDC report claiming that a drop in unauthorized usage of software would increase jobs, increase revenue in the IT sector and increase taxes. That's inaccurate for a variety of reasons, specifically in that it double-counts the impact of certain things and also only counts the "ripple effects" in one direction.

I raised these questions to both Neil and Marcel, and the summary of the call as Marcel noted at the end is that we'll have to agree to disagree. We didn't discuss the ripple effects issue, because that's actually from a different study than the one released today (though, the one today does reference that report to back up its claims -- which is why I brought it up). However, Neil and Marcel defended the "losses" claim by pointing out that plenty of companies out there (they kept pointing to large companies) would go out and buy the software if they had no other option. Indeed. And, I would probably go out and buy lunch at Pizza Hut if I had no other options, but we don't count it as a "loss" for Pizza Hut when I go eat at McDonalds instead. The fact is that there are other options -- even if some of them break the license agreements. My point is that this is a business model issue that the industry needs to deal with by giving businesses positive reasons to pay, rather than threatening to whack them with a legal stick.

However, what became clear in talking to Neil was that the BSA really does seem to believe that the majority of these unlicensed uses really would be paid for -- which seems like a highly questionable claim. We also very much disagreed over calling unauthorized use of software "theft" (he says it is, and tossed out the old favorite about how it's no different than taking a CD or a pack of chewing gum out of a store). He specifically said "software is a tangible good." The problem is that this is simply not true. I'm sure plenty of software companies and the BSA itself would like it to be a tangible good -- but it is not, and no amount of pretending makes it so.

In the end, Neil suggested that maybe this is a "generational" thing (I guess I'm the young whippersnapper), which I don't think is accurate either. I think it's really more of a business model thing. The companies that make up the BSA have relied on a particular business model for many, many years. That business model depends on government-granted monopolies that allow them to create artificial scarcity. They like that business model and don't want it to go away. However, the market is shifting, and it's shifting due to companies recognizing the fundamental characteristics of software being infinite, which allows them to implement other business models that don't rely on artificial scarcity. We're seeing it all the time, even among some companies who are members of the BSA. IBM, for example, has learned that its real money-maker is in services, and free software helps build that market. Red Hat has shown a similar business model on a smaller scale. And Google, which is a software company (even if people don't realize it), has shown an entirely different model to make its software extremely profitable in a way that "piracy" is of no concern.

The more the BSA talks up fundamentally flawed "losses" the more difficult it makes it for many of its members to recognize that the market is changing, and they need to change their business models with it. The less these companies focused on made up "losses" and the more they focused on creating business models where there are good reasons for companies to pay money, the more they'd realize that unauthorized use isn't the problem at all. With the BSA reports on losses, though, too many of these companies are taught to think that the problem is elsewhere (those darn pirates), rather than in how they view the market themselves. And, that, fundamentally, is dangerous for the BSA's own members. So, I very much appreciate both Neil and Marcel for reaching out and taking the time to talk with me, and responding to my criticisms -- and I hope to continue the conversation with them. But, they did little to change my feelings about the BSA report and its misleading nature.

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]]>we've-heard-this-before,-haven't-wehttps://www.techdirt.com/comment_rss.php?sid=20080514/1350531114Mon, 28 Jan 2008 17:42:00 PSTAl Gore Throws Hat Into The IPO Ring...Mike Masnickhttps://www.techdirt.com/articles/20080128/16433597.shtml
https://www.techdirt.com/articles/20080128/16433597.shtmlspeculation about an Al Gore run for the presidency, it appears he's got bigger fish to fry, such as
an IPO for his cable TV station Current Media. Honestly, it looks like a tough sell as an IPO. It's not profitable. There are some serious questions about how viable a business it can be, and its "unique" angles, such as embracing the internet, haven't been all that successful (almost all of its revenue still comes from the TV side). If it succeeds as an IPO, it may be entirely on the strength of Gore's name, which seems like the opposite of what the company should want at this point.